ASEAN Exchanges ASEAN Trading Link 18 September 2012 Frequently Asked Questions What is the ASEAN Trading Link? A B2B gateway for Pioneer Brokers to offer their clients the full range of investment opportunities provided by the connected ASEAN Exchanges. The ASEAN Trading Link allows connected brokers to execute trades directly to the ASEAN Trade Link connected exchange without having to be licensed in that market by that exchange. Which are the Exchanges connected on the ASEAN Trading Link? Bursa Malaysia (BM) and Singapore Exchange (SGX) are connected from 18 September 2012. The Stock Exchange of Thailand (SET) will be added in October 2012 likely at the World Federation of Exchanges 2012 conference. Bursa Malaysia, SGX and SET offer nearly 2,300 listed companies with a market capitalisation of USD1.4 trillion which is nearly 70% of the total market capitalisation of ASEAN. Are all brokers required to participate in the ASEAN Trading Link? Brokers are not required to connect on the ASEAN Trading Link. They can choose to participate on the ASEAN Trading Link when they are ready. Who are the Brokers connected on the ASEAN Trading Link? Malaysia 1. AA Anthony Securities Sdn Bhd 2. Affin Investment Bank Berhad 3. CIMB Investment Bank Berhad 4. HwangDBS Investment Bank Berhad 5. Kenanga Investment Bank Berhad 6. Maybank Investment Bank Berhad 7. Mercury Securities Sdn Bhd 8. OSK Investment Bank Berhad 9. RHB Investment Bank Berhad Singapore 1. CIMB Securities (Singapore) Pte Ltd 2. DMG & Partners Securities Pte Ltd 3. Lim & Tan Securities Pte Ltd 4. Maybank Kim Eng Securities Pte Ltd 5. Phillip Securities Pte Ltd 6. UOB Kay Hian Pte Ltd 1
How does the ASEAN Trading Link work? There are 3 main components in the ASEAN Trading link The Intra-ASEAN Network (IAN) is the infrastructure connecting the participating exchanges. The ASEAN Link Gateway (ALG) provide connecting points between the exchanges. Neutral Access Points (NAP) provide access for parties from outside of ASEAN market. Trading is still based on an inter-broke model where the brokers continue play the key role as intermediaries Originating Brokers (OB) who are not members of the exchange where a trade is executed are required to have a bilateral agreement with at least one Sponsoring Broker (SB) and need to open trading account with them OBs send orders to the local ALG hosted by their local exchange Orders are routed to and executed at the target exchange as direct client of the SBs The order routing process is transparent to the investor The investor simply puts the order through his broker as usual, either via phone or self-directed online platforms Figure 1: ASEAN Trading Link overview diagram. Provided by Sungard. 2
Are there ASEAN Products available today? FTSE/ASEAN Index FTSE/ASEAN 40 Index Global X FTSE/ASEAN 40 exchange traded fund (ETF) the first ASEAN-centric investment product listed on the New York Stock Exchange. CIMB FTSE ASEAN 40 Exchange Traded Fund: Represents 40 of the largest stocks listed across Singapore, Malaysia, Indonesia, Thailand and Philippines. The Net Asset Value of the CIMB FTSE ASEAN 40 ETF has returned 11.32% on an average annualised basis since inception in 2006. What are the benefits to the investors who trade an overseas market using the ASEAN Trading Link? Domestic investors will enjoy easier and more seamless access to a wider variety of products hence providing them with more investment alternatives. Through the ASEAN Exchanges website (www.aseanexchanges.org) and with data provided by FTSE and Thomson Reuters, investors now have access to comprehensive aggregated ASEAN content including ASEAN market data and analytics focused on ASEAN Stars and ASEAN industry sectors. What are the risks associated to trading in a foreign market? When trading in a foreign market, investors need to be aware of risk associated with foreign exchange, home rules of trading, trading restriction (if any) and market risk. Market practices and features may vary across the different participating ASEAN markets, including corporate actions, order types, board lot sizes and error trade procedures and various charges. Investors from Singapore are required to complete the SIP Online Platform (https://onlineeducation.sgx.com/specifiedinvestmentproducts) for a better appreciation of those risks. Please consult your Trading Representatives at your Broking House to understand the SIP Online Platform and to appreciate those risks related to investing in a foreign market better. Are there new market or trading rules? The home exchange market rules and laws apply regardless of where the order was entered. Who custodises the securities that an investor purchases on a ASEAN Tradling Link connected exchange? Foreign securities are custodised with the foreign broker under a nominee account. 3
Who should the investor approach in the event of any further queries in relation to market practices or specific trading issues, e.g. error trades. In event of any trading concerns or queries pertaining to foreign market rules and practises, please consult your broker. Does SGX-ST fidelity fund apply to trades on foreign markets? The Fidelity Fund is only applicable to trades done on Singapore Exchange and does not apply to investors investing in the capital markets outside of Singapore. What should investors be aware of with respect to foreign ownership restrictions? Each Participating Exchange s involvement in the management of foreign ownership restrictions differ. Bursa Malaysia and SGX do not monitor such restrictions or regulate trading in such shares. Stock Exchange of Thailand (SET) has a more active role. Most SET-listed Thai companies have foreign ownership restrictions. The information on the foreign ownership restrictions in respect of each individual stock is available on SET s website ( http://www.set.or.th/set/factsheet.do?symbol=aeonts&language=en&country=us). In normal practice, foreign investors have to invest in securities designated for foreign investors (stock abbreviated name, with suffix F) to fully obtain all voting rights and financial benefits. In case that the foreign ownership limit has been reached and foreign investors cannot acquire securities designated for foreign investors, they may choose to trade in a domestic liquidity pool by investing in securities designated for local investors (stock abbreviated name, without suffix). They are allowed to flexibly buy and sell securities designated for local investors to gain capital gain from the price movement; however, foreigners are not entitled to obtain any voting rights and dividend from the company if they hold securities designated for local investors on the book-closing date. Foreign investors are allowed to conveniently convert securities designated for local investors to those designated for foreign investors at anytime as long as the foreign ownership limit has not yet been reached. In the event that the foreign ownership limit has been reached, foreign investors conversion request will be on queue, and their shares will be automatically converted to securities designated for foreign investors if the foreign ownership room becomes available. The conversion to securities designated for foreign investors will allow foreign investors to obtain all beneficial rights on the book-closing date. For greater efficiency, flexibility and convenience of foreign investors, SET established an alternative investment channel called Non-Voting Depository Receipt (NVDR) on the local board (stock abbreviated name, with suffix R) in 2000 as a special vehicle with the objectives of facilitating foreign investors to trade securities that may reach the foreign ownership limit while obtaining all financial benefits with the exception of voting rights. In practice, foreign investors have chosen to trade NVDR units even though the foreign ownership limit of these securities has not yet been reached. Foreign investors can easily buy and sell NVDR units on the local board, i.e., the domestic liquidity pool, with the same process and price as regular securities on the local board. Some features of NVDR can be summarized below: Beneficial rights: Foreign investors are entitled to obtain all financial returns, but do not have voting rights; 4
Ease of trading: The trading of NVDR follows the general trading practice of securities designated for local investors. There is no difference in trading method. NVDR shares the same liquidity pool with securities designated for local investors; and, Flexibility of holding: Foreign investors are able to conveniently convert NVDR at anytime to securities designated for local investors or securities designated for foreigners if, in the case of the latter, the foreign ownership limit has not been reached. In the event that the foreign ownership limit has been reached, foreign investors conversion request will be on queue, and their shares will be automatically converted to securities designated for foreign investors if the foreign ownership room becomes available. Information on Non-Depository Receipt (NVDR) is available at http://www.set.or.th/nvdr/en/faqs/faqs.html 5